Prerequisites for Mutual Fund investments

Mutual funds are the best investing avenue to those who are not interested to enter direct equity investing. Like common stock or share investments, mutual funds also not avoiding the risk of losing money. Prior to do any investments, an investor should analyze the possibilities and risks associated with targeted investment instruments. Using the guidelines below, originally provided by Securities and Exchange Board of India, a mutual fund investor should look into some factors before investing.

Before commit any investment in any mutual fund products, an investors should ask the offer documents as well as key information memorandum to know more about the scheme. Mutual funds also riskier like direct stock investments but, some schemes. Offer documents are your best friends to identify the product, investment vision and the associated risks with the product.

Using the documents and given information on it will make you able to identify your investment perspective as per your risk profile. This is a must requirement of an investor that he should identify his risk profile and goals to do any investments properly. You should be well aware about all the risk factors associated with the product where you are going to invest.

An investor should be aware that the NAV – Net Asset Value – can be changed upon market situations. It is required to monitor your funds properly to know the performance and the present status of net asset value. For Example, if your net asset value of a fund reducing but the market is continuously going up mean, the fund is a laggard and underperformer. Commonly the NAV will raise or down depends on market up and downs. A fund with its NAV continuously going down, is not a good symbol to hold the same.

You should be well aware about the past and present performance of a fund. Also, should be informed that the past and present performance of a fund is not a guarantee for future performance. Monitoring can be resolved these issues in a great extend. Any major changes in the fund management style, changing the fund manager can affect the performance of a fund in a great extend. Even though, changing the fund manager will immediately affect the fund but, you have to give little time to understand the style of new fund manager and the result with fund under his management. Some time these major changes will affect the funds badly but some time, this will help you to get good profit because of new and capable fund manager.

You should be in touch with the mutual fund office to get the statements and other information on proper time. Account statements are a best way to analyze your fund performance and help you to do a compare study. Always ask and keep the proper proofs for any kind of deal with mutual fund offices. Copy of given cheque, counter foils or any other receipts are the best proof to tackle any unfair situations that may happen in future.

Below are some don’t for a mutual fund investor should take care off always:

Never invest in any schemes because somebody recommend or advice with any commissions or gifts. There will be some hidden intention behind this but not favor to the investor. Do not fall into boosting or promises on high returns in the future. This is a very big mistake most of the investors are committing because of less knowledge and common sense.

Name and reputation of the mutual fund and the glittering name of the scheme are not a guarantee for profit. Instead, find out the past and present scheme performance and the fund manager abilities by digging to the other funds he is managing and its performance. Understand, nobody in this world can give guarantee to profit or performance on any equity related investments.

Never delay or hesitate to approach proper authorities, offices or people to notice any issues that may occur to you. A big mistake from most investors concerns are the improper approach. Any investments in your life should do through authorized and proper channels to avoid problems in the future.

Always deal with licensed people/agents/offices who are the part of an organization registered with concerned authorities and have license to deal with proper investments.

Half doctor always kill patients. Agents are one of the elements you must avoid when dealing with investments. Majority of them are just like the half doctor I said above and doesn’t have enough knowledge about the product or capable to lead investor properly. To get sales, they easily promise you huge returns, incentives or gifts. Hidden intention behind most of them are there on profit. I said in one of my previous article “Let father die, I need money” is there major motto. So avoid them at any costs.

Always remember the truth: In the world of investments, wise steps and action has lots of importance. An investor should ask two important questions before committing to any investments, “What I am doing and Why I am doing. An investment selection is not suitable to your risk profile and objectives, will only give you sleepless nights and enormous heart pain. So be a wise investor. Know what you are doing and why you are doing. You can win.

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